Consulting, bad news, and Campbell Newman

Queensland is shedding public workers in the health and education sectors in a bid to balance the books. There is nothing unusual about this, and there are more than enough ‘head-office’ positions that can be axed without any impact on the productivity of schools and hospitals. Unions complain, of course, but if anything I would think that tackling the chronic incompetence of the Queensland Health central office by simply halving its staff is actually good for morale and productivity in that sector (yes, they were that bad!).

But why did the Queensland premier have to pay others to deliver the bad news? I am referring to the two bogus ‘consulting’ reports here that preceded the cuts, one by Peter Costello and one by KPMG. Taxpayer’s dollars handed out to friends to produce old news. Why bother?

Well, if you see how the public discussion has panned out, you would say ‘money well spent’ from Campbell Newman’s point of view. Instead of having to defend his decisions himself, he can pretend to abscond from responsibility by saying ‘look, the report made it clear that….’ and the report, most fortunately, is written by people who cannot be fired or unelected because they are neither employed by Queensland nor voted for – well-compensated scapegoats.

From an economic theory point of view, such clear instances of cheap talk are puzzling: why bother paying others to give out news that anyone concerned should know comes from you anyway?

There are several possible explanations. One is of course stupidity on the side of voters or unions as to why the real decisions were taken, but in this case I don’t think there are many that have been fooled.

A more probable reason is that of pure association: whoever brings out bad news is associated in the mind of those listening with the negative emotion the news brings up. It’s an associative memory thing which we have little control over. Just as the word ‘Holland’ makes many people think of cheese and clogs, so too would ‘Queensland budget cuts’ be associated with ‘KPMG report’ in the minds of many voters. It takes some of the sting out of it for the premier.

A final reason is the image of power that it projects and the lies it forces others into. Having an outsider bring the bad news allows the premier to pretend his hand is forced. It makes him look like the independent arbiter weighing information objectively that he was given from others. It is part of the pantomime of politics. Within that pantomime, the opponents of cuts are then forced to go along with the farce and ‘bring’ him information to ‘argue the opposite’ and he can then, in his benevolence, make the best decision for all. This may not be worth much in a parliamentary debate, but when talking to community leaders and civil servants, forcing others into a subservient role in the pantomime works great. As I said, money well spent from the premier’s point of view.

From a public policy point of view though it would probably be best if tighter limits were set on how much could be spent on consulting by the administration. Alternatively, having an independent public economics institute involved in calculating the effects of policies on budgets would also get us out of this costly pantomime.

Interestingly, the “impartial outsider” consultancy ploy does not require democracy to work. I was once on a World Bank consultancy where it soon became evident that the purpose of the consultancy was for some Shanghai politicians to formally tell some Beijing politicians something all parties already knew perfectly well but which required a set of convenient scapegoats (foreign ones – even better) before action could be taken.